Crude Oil
Crude Ends Lower as Supply Risks Broaden Beyond Hormuz
Crude prices trended lower this week as intermittent attacks between the US and Iran continued and flows through the Strait of Hormuz remained constrained. The WTI prompt-month contract settled Friday at $84.67/Bbl, down $4.64/Bbl from the previous week’s close of $89.31/Bbl. Despite the decline, the market continued to face broader supply threats involving Red Sea shipping and exports through the Caspian Pipeline Consortium.
Prices came under pressure early in the week after the US and Iran paused their respective military campaigns to give diplomacy another opportunity. However, the pause was short-lived, with both sides carrying out renewed attacks later in the week. Iran launched missiles at US bases in Jordan, while the US and Saudi Arabia struck Iran-backed groups in Iraq. Although reports indicated that oil-transfer activity through Hormuz had increased, flows have yet to recover meaningfully and tanker traffic remains well below normal levels.
The stop-and-start nature of the conflict is also forcing Gulf producers to adjust output around available export windows, raising production when vessels can transit the strait and curtailing it when exports are constrained. Despite increased US naval escorts cited by Energy Secretary Chris Wright and new operating adaptations by regional producers, analysts estimate that lower Middle Eastern loadings have already contributed to declines in oil-on-water inventories. Those losses are expected to feed into onshore stock draws during August and September.
Supply concerns also broadened beyond the Middle East. The Caspian Pipeline Consortium considered suspending operations following Ukrainian attacks near its Black Sea terminal, which has handled roughly 1.8 MMBbl/d of predominantly Kazakh crude in recent months, according to Bloomberg. Because the terminal serves as Kazakhstan’s primary route to the global market, an extended disruption could force producers to reduce output as available storage fills. At the same time, continued Houthi threats to Red Sea shipping leave Saudi Arabia’s alternative western export route through Yanbu exposed.
The market ends the week with shipping through Hormuz still limited and no durable solution to the conflict or the region’s export constraints. With inventories declining and supply risks expanding from the Gulf and Red Sea to the Black Sea, crude remains vulnerable to further attacks or prolonged disruptions. AEGIS maintains a neutral view on price.